Seller Considerations – Cost of Waiting to sell

     Many Sellers believe that the risks associated with waiting to sell are minimal. They rationalize that holding onto the property until prices recover, will cost them no more than a few monthly payments and some other nominal carrying costs. When all financial factors are considered however, the true cost of waiting can be much higher than the amount envisioned by a Seller.

All Sellers should ask themselves the following 3 questions when they’re considering the financial implications of keeping their home a while longer:

1. What are all of the costs of keeping my home? And, not just for the next year, but for 2-3 more years, as it could take that long for the market to recover.

These costs should include:    1 year                2 years                 3years                  Total

A. Any Principal and Interest payments made in the next 1-3 years

B. Property Taxes

C. Home Owner’s Insurance

D. Utility Payments

E.  Maintenance Costs, lawn, pool, etc..

F. Potential Repairs to roof, interior, etc.

G. HOA Dues

2. What are the Lost Opportunity costs? or how much would I lose if I would have sold the home now and re-invested the home equity into another investment? Even at a modest 5% per year, this amount can add up quickly. A good way to calculate the annual percentage is by looking at existing investments the seller already has. Are they yielding 3, 5, or possibly even 10%.                           1 year                2 years                 3 years

3. What is the risk associated with continued depreciation?- Prices are expected to drop in many major markets in the United States. A seller can take the average depreciation of the last few years as a guide to determine how much more prices could drop. In other words , if prices have dropped 10% per year over the last few years, factor that depreciation into carrying costs:                               1 year                  2 years                 3 Years

4. Total- What is the total loss of all  factors above?          ________      _________     _________

The answer to the final question above is almost always much more than sellers realize when they actually document the numbers in writing. Once this number is identified, it’s much easier to determine if holding on to the property for a longer period of time is really worth it.